Thursday, September 30, 2010

California Governor Arnold Schwarzenegger has vetoed AB 1060, the legislative bill that had it become law would have made it illegal for grocery and other format stores to sell alcoholic beverages at self-service checkout lanes, such as those used by Tesco's Fresh & Easy Neighborhood Market.

The Governor vetoed AB 1060, along with a batch of other bills, before the midnight deadline tonight, at which time it, and any other bills he doesn't veto, will automatically become law. You can read the Governor Schwarzenegger's veto message regarding AB 1060.

AB 1060 was authored by Assemblyman Hector De La Torre (D-South Gate, Southern California) and supported by the United Food and Commercial Workers union (UFCW), Mothers Against Drunk Driving (MADD), a number of California law enforcement agencies and others. It was opposed by the California Grocers Association and the California Retailers' Association, both trade associations for grocers and other format retailers with stores in California.

Self-service checkout at Fresh & Easy. The grocer calls its system assisted checkout because store clerks will assist customers in scanning and bagging their grocery purchases if asked.

CEO Tim Mason and his team at Fresh & Easy Neighborhood headquarters in El Segundo, California will be relieved to learn about the Governor's veto of what we've been calling the "Tesco Fresh & Easy Law," since had he signed AB 1060 the grocery chain would have most likely had to change their self-service-only checkout scheme in its California stores, offering at least one full-service checkout because of the face-to-face, clerk-to-customer provision of the legislation.

California Governor Arnold Schwarzenegger has been busy yesterday and today signing and taking his veto pen to numerous legislative bills, as the midnight tonight deadline looms closer. Any of the bills on his desk the Governor doesn't either sign or veto before midnight tonight automatically become law.

Yesterday and so far today the Governor, who's completing his last year in office, has dealt with 347 legislative bills. He signed 217 bills and vetoed 130 bills as of this afternoon. [See here, here and here.] That's a lot of activity even for a Governor who played an action here in the movies for years before getting into politics.

By our count, California's chief executive has thus far dealt with 466 of the 765 legislative bills sent to him at the end of August by the California State Legislature. That stills leaves a whopping 299 bills for the Governor to deal with before midnight tonight, which suggests he's going to have to get into "action hero" mode, at least as it pertains to legislative bill activity.

One of those remaining bills Governor Schwarzenegger will either sign, veto or let automatically become law is AB 1060, which if signed or allowed to become law without a veto by the Governor will make it illegal for grocers to sell alcoholic beverages at grocery store self-service checkouts. We've dubbed the legislation the "Tesco Fresh & Easy Law" because Tesco's Fresh & Easy Neighborhood Market will be the only California grocer currently affected by the law, since its the only chain that offers self-service checkout-only in its stores in the Golden State.

Word is the Governor is currently at his desk, remaining bills stacked high, working away at an "action hero" pace. Stay tuned. Fresh & Easy Buzz will report the outcome of AB 1060 as soon as we know what it is.

Tuesday, September 28, 2010

California Governor Arnold Schwarzenegger's office just issued a legislative update report, updating the Golden State chief executive's bill-signing activity, as of yesterday and today. The update, which you can view here, is dated September 28, 2010.

If AB 1060 becomes law, it will make it illegal for grocery and other format stores to sell alcoholic beverages at self-service checkout. However, and the reason we named the bill what we have, is because Tesco's Fresh & Easy Neighborhood Market is the only grocery chain in California that offers self-service checkout-only in its stores. All of its competitors offer either full-service checkout-only or, in the case of those grocers offering self-service, offer both the full and self- service options in their stores. Hence, the "Tesco Fresh & Easy Law," since Fresh & Easy Neighborhood Market is the only chain with stores in California directly affected if the bill becomes law.

If AB 1060 does become law - and unless the Governor vetoes the bill before midnight on Thursday, September 30 it will do so automatically - it will most-likely require, at a minimum, Tesco's Fresh & Easy to offer at least one full-service checkout lane in each of its 107 California stores. That's something the grocer doesn't want to do, although we've suggested it is something Fresh & Easy Neighborhood market should do regardless of the legislation.

Tesco's Fresh & Easy offers what it likes to call "assisted checkout." What that means is the checkout is self-service. However, if a customer asks a store clerk for assistance, the clerk gladly helps the shopper scan and even bag her grocery purchases. It's doubtful that definition and process would be deemed legal if AB 1060 becomes law, however. The legislation stipulates "face-to-face" interaction with a store clerk for any customer purchasing alcoholic beverages.

At the end of August, the California Legislature sent 765 bills to the Governor for his signature or veto. As we reported on Saturday, Governor Schwarzenegger said at the end of business on Friday he had dealt with 119 of the 765 bills - signing 76 bills and taking his veto pen to 43 bills.

Adding in the 35 bills he's taken action on yesterday and today, he's now dealt with a total of 165 bills, which means the Governor still has 600 bills to deal with between now and midnight on Thursday. And among those 600 bills still sitting on his desk include AB 1060, the legislation that if passed will require Tesco's Fresh & Easy to change its 100% self-service checkout policy.

The Governor doesn't have to sign or veto the remaining 600 bills. There's no law that requires him to do so. In fact, historically many California Governors have let some bills go without either their signature or veto, allowing the bills to automatically become law after the deadline.

The clock however is ticking on AB 1060. The Governor has until before Midnight Thursday to veto the bill. And of course, if he signs it, the result is the same as having it automatically become law.

Tesco's Fresh & Easy Neighborhood Market hasn't said anything publicly all year about the legislation. However, when the bill was in the California State Assembly and then State Senate (it passed in both), it's lobbying and public relations firm worked behind the scenes to try to kill it, as did the California Grocer's Association (CGA), which Fresh & Easy is a member of.

Interestingly, not one of CGA's other grocer-members, not Safeway Stores, Kroger's Ralphs, Albertsons, Stater Brothers, Save Mart, or any of the numerous other chains and independents that belong to the trade association, will be affected by AB 1060, since none of the retailers offer self-service checkout-only.

The only potential downside it could have on these grocers is it would prevent them from having any future ability to sell alcoholic beverages at self-service checkouts, assuming any of them every wanted to. In fact, the passage or defeat of AB 1060 isn't even a priority, nor is it on their political radar screens, for the major California grocery chains mentioned above and most others.Related Stories:

Mike Gilliland poses in the produce department of a Sunflower Farmers Market store. Fresh produce is front and center and featured in the stores - and Gilliland likes it that way. In fact, don't be surprised if you run into the founder and CEO pictured above while shopping in one of the 30 Sunflower stores. The stores, especially the big produce departments, are one of his favorite places to be, along with his 40-acre farm in Colorado, where much of the produce raised is sold in those very produce departments, at the Colorado stores.

As he prepares to take his fast-growing, fresh produce-focused, combination natural/organic and conventional grocery chain into Northern California, Sunflower Farmers Market founder, CEO and chairman Mike Gilliland has just received an honor from his hometown Chamber of Commerce in Boulder, Colorado, which recognizes the retailer's 24-years as a food and grocery industry entrepreneur, much of it spent in Boulder. Gilliland founded Sunflower Farmers Market in Boulder in 2002.

Gilliland has been selected as a 2010 Entrepreneur of Distinction by the Boulder Chamber of Commerce Esprit Awards committee. The award recognizes and celebrates the outstanding spirit of entrepreneurship in Boulder County, the Chamber said today.

Gilliland will receive his award at the 26th Annual Esprit Entrepreneur Banquet on Thursday, October 7, 2010, from 5:30 to 9:00pm in the University of Colorado’s University Memorial Center Glenn Miller Ballroom.

In addition to Gilliland's award, the Boulder Chamber of Commerce is honoring three other local entrepreneurs at the October 7 event.

"I am honored to have been chosen for this distinction," Gilliland says. "It’s terrific that the Boulder Chamber of Commerce recognizes and acknowledges the hard work and dedication of local entrepreneurs, as well as the unique challenges and opportunities that entrepreneurs face. I’m proud to be included in an event that recognizes some impressive local leaders and their indomitable spirit."

The city of Boulder, Colorado and Boulder County is a pioneering American region when it comes to the natural/organic food and grocery industry. Along with Northern California, the city of Boulder and the surrounding region has arguably spawned more industry start ups and successful natural and organic foods' companies than anywhere else in the U.S. And Gilliland, having founded and headquartered two retail chains - Sunflower Farmers Market and Wild Oats Markets - in Boulder, is a major contributor to that developement.

Sunflower Farmers Market, which Gilliland founded in 2002, remains headquartered in Boulder, as well as having some of its corporate functions in Arizona.

Gilliland also co-founded Wild Oats Markets in Boulder in 1987. He served as Wild Oats' CEO from 1987-2001, growing it from a single store to a publicly-held chain of 115 stores and about $1 billion in annual sales, when he left. Wild Oats' board, its investors, and Gilliland were all ready for a change in 2001.

In 2007, Wild Oats Markets was acquired by its chief competitor, Whole Foods Market, Inc. for $565 million, following a number of years of serious struggle, which saw Wild Oats' sales and profits plunge and its stock share price drop considerably.

When Whole Foods Market, Inc. acquired Wild Oats Markets, Inc., Wild Oats' had annual sales of about $1.2 billion and operated 110 stores in 24 U.S. states and British Columbia, Canada under the following banners: Wild Oats Marketplace, Henry's Farmers Market, Sun Harvest, and Capers Community.

Shortly after acquiring Wild Oats, Whole Foods Market sold the Henry's Farmers Market and Sun Harvest stores, which were operated as a separate chain by Wild Oats and headquartered in Irvine, California, to Southern California-based Smart & Final, which has been growing Henry's ever since. Smart & Final has kept the same independent structure for Henry's, with some centralization in areas like private brands, as well as its headquarters in Irvine, where it remains based.

Gilliland, who attended the US Air Force Academy, the University of Grenoble in France, and received a Bachelor of Arts degree in history from the University of Colorado, didn't waste any time after leaving Wild Oats in 2001. He started Sunflower Farmers Market in 2002 and has grown the chain to 29 stores in six states - Colorado (10 stores), Arizona (7), Utah (2), New Mexico (6), Texas (3) and Las Vegas, Nevada (2) - since then.

In addition to opening numerous new stores in the six states over the next few years, Gilliland is looking to enter new markets, starting with Northern California, where he plans to open the first Sunflower Farmers Market store in early-to-mid 2011. He's also looking to Southern California and a couple other western states as new market regions in which he can open his stores, which use the slogan: Sunflower Farmers Market: 'Serious Food...Silly Prices!

Food and grocery retailing in the U.S. is interesting and dynamic thanks in large part to entrepreneurs like Mike Gilliland and many others like him.

There's John Mackey, the co-founder and co-CEO of Whole Foods Market; the Wegman's and the Butts, two entrepreneurial families who've build (and still run) what pound-for-pound are arguably the two best grocery chains in America, Wegmans on the east coast and H-E-B in Texas; Bob Piccinini, majority-owner, CEO and entrepreneur-in-chief of Modesto, California-based Save Mart Supermarkets, who since taking over as president and majority-owner from his father in 1981, of what was then a 40-store local grocery chain, has built it into a regional chain of 250 stores and about $5 billion in annual sales, all the while creating thousands of good jobs and donating millions of dollars to community organizations.

Gilliland and the others noted above are just a few of the many food and grocery retailing entrepreneurs and entrepreneurial families making their respective mark in the business - and making it much more interesting, dynamic and far better for consumers and the industry itself than would be the case if it was a strictly publicly-held, big chain industry, like is the case in many developed countries.

Congratulations to Mike Gilliland. And may those grocer-entrepreneurs who've done well, like Mike Gilliland and the many others, find, nurture, motivate and support a new generation of budding grocer-entrepreneurs, so the entrepreneurial tradition in U.S. food retailing will remain alive for generations to come.

Beginning tomorrow, Tuesday, September 28, the first nine 'eatwell' frozen food items (SKUs), which are ready-to-heat meal-type items, are set to hit the freezer sections in Tesco's 168 Fresh & Easy stores in California, Nevada and Arizona.

The fresh food and grocery chain has promoted the 'eatwell' refrigerated items aggressively since the initial launch. In addition, in July, Fresh & Easy added some new items to the fresh-prepared foods line.

The extension of the 'eatwell' brand into the dry grocery category, which appears to be a test since the only item we've seen thus far is the canned chili, has been without fanfare - the grocery chain hasn't announced it's done so via a press release, for example. As far as we're aware, Fresh & Easy Buzz is the only publication to date to report on the development.

Tesco's Fresh & Easy hasn't yet announced the extension of its 'eatwell' brand into the frozen foods category. However, the SKUs are coming. In fact, many of the Fresh & Easy stores have already made room in the freezer cases for the new items, set to start arriving tomorrow.

Bulking up its frozen foods offering

Fresh & Easy Neighborhood Market has been increasing the selection and number of manufacturer brand frozen food items it offers in its stores since earlier this year.

For example, it recently added a number of SKUs in the new P.F. Changs (like the restaurant of the same name) Home Menu Meal line to its frozen foods offering. It's also increased the variety and selection of budget-priced frozen dinners the stores merchandise, including adding a number of Banquet brand frozen meals, which like the P.F. Changs items are being promoted in this week's Fresh & Easy weekly advertising circular.

Additionally, starting tomorrow, Tesco's Fresh & Easy is adding 13 Stouffer's and Stouffer's Lean Cuisine SKUs to the freezer cases, along with the new 'eatwell' frozen food items and the new new SKUs under the 'fresh&easy' brand.

'eatwell' as Fresh & Easy's healthy foods' private brand

The extension of its 'eatwell' brand into frozen foods is a part of Fresh & Easy's bulking up of its variety and selection in the frozen foods category. But more significantly, it's part of the grocer's plan to make 'eatwell' a key private brand across all categories, similar to what it does with its flagship 'fresh&easy' brand - 'fresh&easy' being the basic private or store brand for consumables and 'eatwell' being its healthy foods' brand.

With the addition of the frozen foods category, the 'eatwell' brand will now be represented in three store product categories: Fresh-prepared foods, dry grocery and frozen foods.

In addition to its fresh&easy and 'eatwell' private brands, Fresh & Easy recently expanded its 'fresh&easy' 'goodness' brand, which focuses on healthy and convenient food items geared to kids. The brand is co-branded, with 'goodness' being the prominant name on the packages and 'fresh&easy' in small text at the top. Fresh & Easy Buzz was also the first publication to report on the grocer's expansion of the brand and line, along with the new package design. Read our stories on the developments here. The stories are also linked at the end of this piece.

['Private Brand Showcase' is a regular feature in Fresh & Easy Buzz. In it we report on, offer analysis about, and discuss the various private or store brand developments at Tesco's Fresh & Easy Neighborhood Market, and by and at other food and grocery retailing chains and independents.]

Sunday, September 26, 2010

Target plans to have 'P-fresh' fresh food and grocery markets in 850 of its about 1,500 U.S. discount stores by the end of next year. The 'P-fresh' in-store markets offer fresh produce, meats, deli/prepared foods, perishables, frozen foods and packaged food/grocery items in a 10,000-12,000 square-foot store-within-a-store space. Target has 1,752 Target discount format and SuperTarget stores in the U.S.

Northern California Market Special ReportBreaking Buzz

Over the last 15-18 months, Minneapolis, Minnesota-based discount retailer Target Corp. has opened 42 small-format fresh food and grocery stores in Northern California - at locations ranging from Tracy in the Northern Central Valley and the Sacramento Metropolitan region, to throughout the San Francisco Bay Area - without building one new store. There are currently 72 Target discount stores in Northern California, which is defined as everything north to the Oregon border, and to Merced County in the Northern Central Valley.

Those grocery stores, which offer fresh produce, meats, prepared foods, perishables, frozen foods and packaged groceries, are Target's 10,000-12,000 square-foot 'P-fresh' store-within-a-store markets, which the retailer has so far installed in over half of its 72Northern California discount format stores, allowing it to create about 450,000 square-feet of brand new food and grocery retailing square-footage in Northern California in a little over one-year's time without building a single new store.

In our project, we first identified the total number of Target discount format stores in each region where Tesco has its Fresh & Easy markets - Southern California, Bakersfield Metro, Fresno Metro (California's Central Valley), southern Nevada and Metropolitan Phoeniz, Arizona. Then identified and verified which ones have 'P-fresh' grocery sections inside, as of today.

Additionally, because Tesco plans to open its first batch of stores in Northern California in early 2011, and has future store sites in northern Nevada, we included those two market regions in our research. Today's story on Northern California is the first of what will be similar reports on Target's 'P-fresh' stores in each of the regions detailed above.]Target now has 'P-fresh' in-store fresh food and grocery markets (pictured above) in 42 of its 72 discount stores in Northern California, with more on the way.

Below are the 42 Target discount stores with 'P-fresh' fresh food and grocery sections as of today. We list the stores by region, city, and number of stores in the listed city:

Target plans to add the 'P-fresh' fresh food and grocery sections to a number of the remaining 30 Northern California discount stores, which range in size from about 110,000-180,000 square-feet, a company source recently told Fresh & Easy Buzz.

The initiative is part of the discount retailer's plans to have the in-store fresh food and grocery markets in 850 of its U.S. discount stores by the end of 2011, as we reported here on Friday.

Target Corp. has only one of its big, combo food/grocery/general merchandise Super Target stores in Northern California. That store, which is just a couple years old, is in the Merced County city of Atwater, in the Northern Central Valley.

Target and Tesco's Fresh & Easy

In January 2008, Tesco announced it had acquired 37 locations in Northern California - in the San Francisco Bay Area and Sacramento Metro region - for its small-format Fresh & Easy Neighborhood Market fresh food and grocery stores. Since then the retailer has added numerous locations, which we've reported on. See our Northern California Fresh & Easy Store List for details.

Target announced it's plans to add the 'P-fresh' fresh food and grocery markets inside its discount stores in spring 2009. In contrast to Tesco's Fresh & Easy, it started work right away. Beginning in about May 2009 it began adding the units to discount stores throughout the U.S., including what now are 42 in Northern California. And by the end of next year, Target will have the "P-fresh" markets in many more of its current 72 discount stores in the region.

Tesco's Fresh & Easy would have to open all 37 of its confirmed Northern California locations, along with at least five of the unconfirmed stores, in 2011 just to be even with what Target has achieved as of today.

Interestingly, if you look at our list above of the 42 Northern California discount stores Target currently has its 'P-fresh' grocery sections in, and compare it to our list here of Fresh & Easy Neighborhood Market locations planned to date in the region, you'll see Target already has 'P-fresh' markets in many of the Northern California cities where Tesco plans Fresh & Easy stores.

Additionally, Target has discount stores in most of the Northern California cities where Fresh & Easy stores are planned to date, which it can and likely in many cases will, add the 'P-fresh' fresh food and grocery markets in. Target also is planning two stores in San Francisco, both of which it plans to have 'P-Fresh' markets in. The two stores, one a regular-sized discount format store and the second unit a 60,000-1000,000 square-foot store, will be the first stores for Target in San Francisco.

Further, Target is far from finished building new discount stores in Northern California. And with its new smaller, urban store prototype, it will be able to go into regions and cities like San Francisco, Oakland, San Jose, Sacramento, Marin County and others where it's not often possible to build a 120,000-180,000 square-foot traditional discount store. Most of targets new standard discount format and new urban format stores are set to include "P-fresh' fresh food and grocery markets inside.

Lastly, Target still has 30 of its current 72 discount stores in Northern California without 'P-fresh' markets. Based on information we have, at least half of those 30 stores should have the 10,000-12,000 sqaure-foot store-within-a-store fresh food and grocery markets inside by the end of 2010

Zero-to-42 with minimal investment

Seldom if ever can a retailer go from zero-to-42 fresh food and grocery stores in a little over a year's time without having to acquire a single new parcel of land or one vacant building to put a store in, or spending huge sums of money on for construction and related costs, as Target has been able to do in Northern California.

For Target, project 'P-fresh' is an extremely cost-effective way to get into food and grocery retailing in a significant way in Northern California and throughout the U.S., which it's doing by planning to have the fresh food and grocery markets in 850 of its about 1,500 discount stores in the U.S. by the end of next year. It's also a good way to lure new shoppers into the stores, who then are likely to buy some of the tens of thousands of other items - ranging from household goods, clothes and furniture, to electronics and much more - the retailer offers in its big, discount format stores.

Stories So Far: 2010 'Northern California Market Special Report' Series

Saturday, September 25, 2010

California Governor Arnold Schwarzenegger, who doesn't need an introduction, has only five days - until before midnight on Thursday, September 30 - to veto (or sign) AB 1060, the bill, approved by both houses of the California Legislature and sent to the Governor at the end of August, that would make it illegal for grocery stores to sell alcoholic beverages at self-service checkout stands. If the Governor doesn't veto the legislative bill by the deadline, it automatically becomes law. Obviously, if he chooses to sign it, the result is the same.

We call AB 1060, which is authored by Assemblyman Hector De La Torre (D-South Gate, Southern California), the "Tesco Fresh & Easy Law," not because the legislation was authored to directly target Tesco's Fresh & Easy Neighborhood Market (although labor union encouragement and support of the bill plays does involve Fresh & Easy directly) but rather because if passed it will require the fresh food and grocery chain to change the policy at its 107 California stores , from self-service checkout only to having at least one full-service checkout lane, since the legislation requires all purchases of alcoholic beverages to be handled face-to-face by a store clerk at checkout.

A number of grocery chains in California offer self-service checkout lanes as an option in their respective stores, but none offer just self-service, like is the case with Tesco's Fresh & Easy.

Fresh & Easy Neighborhood Market calls its system "assisted checkout," meaning if a customer asks, a store clerk will gladly help with the checkout and bagging process. However, such a scheme wouldn't be allowed if AB 1060 becomes law. Rather, anytime an alcoholic beverage item is purchased, the customer must be waited on in a full-service way by a store employee.

On Friday, the Governor announced he has so far signed 76 and vetoed 43 of the 765 bills sent to his desk when the legislative session ended on August 31. [Click here to view the signed and vetoed bills.]

With 546 more bills to either sign or veto (or do nothing with and let automatically become law) in just five days, the chief executive of the Golden State still has his work cut out for him, real-life action figure or not. Something tells us Governor Schwarzenegger's home reading list is pretty full this weekend. And action thriller novels likely aren't part of the list.

If AB 1060 becomes law, Tesco's Fresh & Easy is going to have to go back to the drawing board in terms of its self-service checkout only policy and operational practice. However, Fresh & Easy Buzz has suggested, in those types of stories in which we offer analysis and/or commentary, that the legislation is actually an unintended favor by the state legislature - and perhaps also by the Governor - to Fresh & Easy Neighborhood Market.

If the bill becomes law, it will essentially force Fresh & Easy Neighborhood Market to operate at least one checkout as full-service in each of its California stores.

Therefore, from our analytical perspective, the passage of AB 1060 into law, either by the Governor's pen or his allowing it to automatically become law by not exercising a veto, would be a favor, albeit unintended, to Tesco's Fresh & Easy.

We don't think having state legislators make retail operations policy for grocers is the greatest idea. But, ironically, if AB 1060 becomes law, leading to Fresh & Easy Neighborhood Market's creating at least one dedicated full-service checkout lane in each of its California stores, the term the "Tesco Fresh & Easy Law" will probably end up meaning the State of California passed a law which actually forced Tesco to make a change - adding the full-service checkout lanes - that resulted in more satisfied customers and an increase in business at its 100-plus California Fresh & Easy stores.

Beginning today, Fresh & Easy Buzz will countdown the days until September 30 - 'The California AB 1060 Countdown' - on our Twitter feed here (and at the top right hand of the blog) until the Governor either signs or vetoes the bill. If he doesn't veto AB 1060 before midnight, September 30, it will become law without the need of his signature.

Friday, September 24, 2010

Target, the second-largest U.S. discount chain (after Walmart Stores, Inc.) hit a bulls-eye today with its "On Target," "All Target," media event, which it held at a location dear to the company's, and Minnesota Twins fans' hearts, in Minneapolis, Minnesota. Target is headquartered in the city.

The location: First up, the event was held at Target Field, the Minneapolis ballpark named after the retail chain and home to the Minnesota Twins baseball team. That's a pretty good start when it comes to branding an event. [Target Field has a high definition Web Cam, which allows you to view the ballpark. You can check it out here.]

Little details: Next, drinks and snacks at the event were from a nearby Target store or two. That's pretty good branding reinforcement.

See, "All Target," and "On Target" so far.

The bulls-eye: But most importantly, the retailer was on target - and even hit a bulls-eye because there was actual news announced (some was confirmation), along with a lot of good information offered, at the event. You can't say that about many, or even most, corporate media events.

Target's senior executive team was present today, nearly to a man and women. Presentations were given by CEO and chairman Gregg Steinhafel, CFO Doug Scovanner, John Griffith, executive vice president of property management, and a host of corporate merchandising executives, who talked in detail about merchandising and marketing plans, upcoming holiday promotions, a new advertising campaign, and more.

We're going to focus (below) on the two major announcements, and one minor, made today that most pertain to the food and grocery retailing aspects of Target's business and U.S. food and grocery retailing in general.

Target's Smaller-Format Urban Stores

Target confirmed and publicly announced today it's created a new urban prototype store format. The format ranges in size from 60,000-100,000 square-feet, with an average size of about 80,000 square-feet, according to John Griffith, Target's executive vice president of property management.

The average size of Target's discount format stores, which is the most prevalent of the chain's two current U.S. formats (the other being its combination grocery and general merchandise Super Target), ranges from 120,000-180,000 square-feet, according to Griffith. Target has about 1,500 discount stores in the U.S. and about 243 Super Target units, which are similar to a Walmart supercenter and offer a full selection of food and grocery products, along with everything Target sells in its discount stores.

Griffith said the first urban format Target store, which will be about 90,000 square-feet, will open in 2012, in Seattle, Washington. Initial plans, subject to change, are to have the smaller, urban stores in 10 U.S. cities to start. The cities include San Francisco, Los Angeles, New York, Chicago, Boston, Miami, and Baltimore. The urban format puts a premium on offering more essential types of products.

Target says it currently has about 150 full-sized discount stores located in numerous U.S. cities, including in a few big cities like Chicago and New York City, that have populations of over 100,000. Most of its stores are in suburban areas though.

That's where the smaller, urban store format comes in. The smaller stores will be used when size is limited, which is the case, for example, in most all of Manhattan, as well as in other dense urban cities like San Francisco and Seattle, and in urban places like downtown Los Angeles and many parts of Chicago, along with many other places in the U.S.

Like Walmart, which has now decided to "go smaller and go urban," in addition to being big, brawny and mostly suburban - See: July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store - Target has come around to realizing it's been missing a huge opportunity, and the added sales that come with it, by not having stores in most of America's most populated urban regions and cities. That's due largely to Target's (and Walmart's) strategy to date - instead of having multiple store sizes and formats, designed to fit various regions, it's relied on a one-store-size-fits-all approach, which has resulted in being locked out, for the most part, of these highly populated but space-limited cities. Target's Griffith said today the retailer now plans to make the store fit the site rather than making the site fit the store.

Target, like Walmart, is now hungry for those urban shoppers' dollars.

In July of this year, Target submitted a proposal to the city for its first store in San Francisco. That store, which would be a full-sized Target discount store, is planned to go into two vacant big box buildings, a former Mervyn's department (before that a Sears) store and a former Good Guys electronics store in a shopping center at Masonic Avenue and Geary Boulevard in the city's Richmond District, near the Laurel Heights neighborhood. The center is also near the University of San Francisco's main campus. Target would renovate the stores, which are next to each other, completely, creating one big store.

Target is already making plans for a second store in San Francisco. That store, which would be one of the new, smaller format stores, would be in the popular Metreon Shopping Center, in the city's South of Market neighborhood. The Metreon is a 350,000-plus square-foot, four-level combination shopping, technology and entertainment center. See here.

The smaller-format urban stores will include Target's 'P-fresh' fresh food and grocery sections, which it's been aggressively putting in its discount stores, although the mini-markets could be scaled down on a store-by-store basis from the current 10,000-12,000 square-feet size, based on the smaller stores' overall square-footage.'P-fresh' Food & Grocery Markets in 850 Stores By 2011 End

The second bit of news Target announced today is that it will have 'P-fresh' fresh food and grocery store-within-a-store markets (pictured above) in 850 of its Target discount stores by the end of 2011. The 'P-fresh' sections average 10,000-12,000 square-feet. Troy Risch, Target's executive vice president for stores, said 'P-fresh' will be in 450 discount stores by the end of this month, which means the retailer plans to add the fresh food and grocery sections to 400 stores between October 2010 and the end of 2011.

To put that number into perspective, Target started out in mid-2009 saying it planned to test the 'P-fresh' grocery sections in about 100 stores. At the end of 2009, saying it was pleased with the initial test, the retailer said it would add the mini-fresh food and grocery markets to 350 discount stores this year. The 850 number means by the end of next year, Target will be offering shoppers the fresh food and grocery option in over half of its current 1,500 discount stores.

Target has been aggressively installing the 'P-fresh' food markets in its discount stores since first announcing its plans to do so in mid-2009. In fact, Fresh & Easy Buzz is currently working on a research project in which we are identifying all of the 'P-fresh' sections added to Target stores in California, Nevada and Arizona - the three states where Tesco has its 168 small-format (about 10,000 square-feet) Fresh & Easy Neighborhood Market fresh food and grocery stores. Thus far into our research, the numbers are dramatic.

What's powerful about the 'P-fresh' units for Target, compared to say what Tesco is doing with Fresh & Easy - both are small-format and have numerous similarities of format - is that Target will have 850 units, and can ultimately have 1,500 - and more as it opens new discount format stores - 'P-fresh' in-store markets by the end of next year, without having had to construct one new store building or acquire one vacant building to house the fresh food and grocery markets in.

Take California, for example. Target has 245 discount stores in the Golden State at present, plus a handful of its Super Target combination supermarket/general merchandise stores.

Tesco has 107 of its 168 Fresh & Easy stores in California.

This means Target, if it chooses to put 'P-fresh' fresh food and grocery sections in all of its California stores by the end of 2011, would have double the number of stores as Tesco's Fresh & Easy has, assuming Tesco opens 20 stores in California next year, without having had to build a single new store.

This is powerful and cost effective in food and grocery retailing. The capital costs for Target are minimal by being able to put the 'P-fresh' units into existing stores. Plus the grocery sections draw shoppers who buy the other goods sold in the stores. Even if Tesco were to open 50 Fresh & Easy stores in California in 2011, from store-count and cost-effective perspectives, Target has a huge advantage.

More Grocery, Health & Beauty and Body Care SKUs

Target also said today it's been added more health and beauty and body care items, including private brand, in its stores, something which has been evident in the stores for a few months.

Target has also been increasing its packaged food and grocery, and perishable, SKU count over the last nine months in discount stores without 'P-fresh' sections.

We will be offering an analysis piece on Target's expanded food and grocery retailing efforts - its expansion of "P-fresh," along with how it fits with the retailer's new smaller store urban plans. Stay tuned.

Since we reported and published the piece, we've learned about some additional thinking and discussion at Walmart, involving the four 'marketside by Walmart' stores, which range in size from a little over 15,000 square-feet to about 18,000 square-feet.

Although the 'marketside' fresh food and grocery format as we know it now is going away, Walmart is considering not closing some or all of the four stores, and instead converting them to one or more different formats.

Here's what we know right now:

Even though the 'marketside by Walmart' stores are smaller than Walmart's 20,000 square-foot 'Neighborhood Market by Walmart' prototype store in Rogers, Arkansas [See our July 6, 2010 story - July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store], Walmart Stores' is considering converting some or all four of the 'marketside' stores, which are in Gilbert, Chandler, Mesa and Tempe, Arizona, into a slightly scaled-down version of the 20,000 square-foot 'Neighborhood Market by Walmart' format and store. Based on what we know today, this is the most likely option of the three we're laying out in this piece.

Second, Walmart could replace one or more of the 'marketside by Walmart' units with a smaller version (a true bodega) of its 'Supermercado de Walmart' Latino format stores.

Walmart has a couple of these stores in Metro Phoenix. However, the stores are in renovated Walmart Neighborhood Market stores that, like this one in Phoenix, are 39,000-42,000 square-feet. All four of the 'marketside by Walmart' stores are less than half that size, which is why it would have to be a smaller, hybrid version the the current 'Supermercado de Walmart' units open and operating in Arizona.

Walmart has been working on such a smaller format though. It also operates such stores - in the 15,000 square-foot range, and even smaller - in Mexico. So it wouldn't be a stretch at all. The demographics, however, are only decent for a Hispanic format store in two of the four cities/neighborhoods where the 'marketside' stores are located. Therefore, it would only make sense to convert one, and maybe two, of the 'marketside by Walmart' stores into a Latino consumer-focused store, as described above.

What we know about this format is that it's more focused on basic groceries than Walmart's 'marketside' format is, less upscale and, although it offers some prepared foods, isn't fresh-prepared foods-focused like the 'marketside by Walmart' format is.

We don't know conclusively at this point in time what Walmart is going to do with the four Arizona 'marketside by Walmart' stores. But, based on our most recent information, our analysis is it's likely the retailer will retain at least two, and perhaps all four of the stores, converting the format. A key reason - but far from the only reason - for this is because Walmart Stores, Inc. has long-term leases on the four buildings the stores are housed in.

Further, it's our analysis, based on what we know today, the most-likely format to replace 'marketside' in one or all of the four Arizona 'marketside by Walmart' stores, is a slightly scaled-down, smaller version of the 20,000 square-foot 'Neighborhood Market by Walmart' format.

For example, the 20,000 square-foot prototype store in Rogers, Arkansas includes a pharmacy and fairly good-sized in-store deli. These two departments could be reduced in size, along with shrinking the overall footprint of the 20,000 square-foot store a bit, and then dense up the core of the store, and the format as it is, with just the changes described above, could easily fit in the four 'marketside by Walmart' boxes (the stores.)

Walmart should announce the fate of the format and the four stores at its upcoming analysts meeting in October. We're further reporting the story, and will probably have something additional before then. Stay tuned.

Wednesday, September 22, 2010

Tesco director and Fresh & Easy Neighborhood Market CEO Tim Mason (on the riser speaking and wearing the light grey suit jacket) addresses store employees at the new San Diego Fresh & Easy store, at 32nd Street and University Avenue, this morning. The man in the foreground of the photo on the far right (you see his back), looking at Mason and wearing the dark grey suit, is Jerry Sanders, the Mayor of San Diego. [Photo credit: Fresh & Easy Neighborhood Market.]

The fact California has the third-highest unemployment rate in the United States - 12.4% for August 2010, behind only Michigan, 13.1%, and Nevada, 14.4% - and its lawmakers in Sacramento are 85-days late in passing a state budget, which is causing additional harm to the economy, didn't stop two grocers - Fresh & Easy Neighborhood Market and Whole Foods Market - from opening a spate (four between them) of new stores in the Golden State today.

Tesco's Fresh & Easy opened three of its small-format (about 10,000 square-foot) fresh food and grocery stores today in San Diego County, in the far southern region of California - one unit in San Diego and two stores in Oceanside.

At the complete opposite end of the state, Whole Foods Market opened a nearly-50,000 square-foot market in the Sonoma County city of Santa Rosa, which is in the northern San Francisco Bay Area region. [View photos from the store's grand opening today here.]

Yesterday (and in the case of Whole Foods Market also over the weekend), we wrote about both grocers and their impending new store openings today. You can read our stories at the links below:

Grand opening celebrations were held, starting at 10 am, at all three of the Fresh & Easy stores opened today in San Diego and Oceanside.

Fresh & Easy Neighborhood Market CEO Tim Mason got an assist at the San Diego store opening this morning from the city's mayor, Jerry Sanders, who was on hand for the opening of the new store, which is at 3231 East University Avenue (32nd Street and University Avenue).

The Mayor offered congratulations to Tesco's Fresh & Easy Neighborhood Market on the opening of what is the grocer's second store in the city. "We are happy to see Fresh & Easy continue to expand and hire in San Diego, bringing more nutritious and affordable food options to our neighborhoods," Sanders said this morning.

Herb Schultz, a San Diego County region director for the U.S. Department of Health and Human Services (HHS), and San Diego County Childhood Obesity Initiative Director Cheryl Moder joined Mason this morning to celebrate the opening of the three Fresh & Easy stores and to help the grocery chain officially launch its revamped (high-fructose corn syrup has been removed and the line has all new packaging) and expanded (numerous new SKUs) fresh&easy 'goodness' private brand and line of healthy foods for kids.

Schultz, the Department of Health & Human Services official, put in a plug for Fresh & Easy's fresh&easy 'goodness' brand line this morning, saying: "We applaud Fresh & Easy's efforts to promote more food options so that all different types of neighborhoods have access to affordable, healthy food."

He also got in a plug for the important childhood nutrition program being led by First Lady Michelle Obama, her 'Let's Move!' campaign, saying: "Last week our partnership with the League of California Cities and the First Lady's Let's Move! Campaign resulted in California's cities unanimously approving a resolution in support of ending childhood obesity within a generation. Making sure that neighborhoods have access to better food options are pivotal to this effort."The 'Organic Aromatic' drinks bar and cafe inside the new Whole Foods Market store at the Cottington Mall in Santa Rosa, California. (See here.) Click here to view an extensive photo gallery from the store's grand opening today.

Across the state in Northern California, Whole Foods Market held a softer opening at its new Santa Rosa store today. However, it's planning a big bash on Sunday.

The opening of the three Fresh & Easy Neighborhood Market stores today marks the last of nine stores Tesco has opened this month. Fresh & Easy says it's created 180 (much needed in California, we might add) jobs at the nine stores opened this month.

For Whole Foods Market, today's opening of the Santa Rosa store, its second in the city, is a milestone moment: The store, the grocer's 299th unit, opens during Whole Food's 30th birthday week.

In addition to Tesco's Fresh & Easy and Whole Foods, numerous other grocers have been and are opening new stores throughout California this year. Some people suggests it's because "people have got to eat." But as we often say in Fresh & Easy Buzz in response to that oversimplified explanation, "Yeah, but they don't have to buy their food at your store."

The main reason for all the new grocery store openings in the Golden State, despite the state's current high unemployment rate and the fact it's still struggling, although improving in some ways economy, is three fold: California is home to nearly 40 million people, nearly the population of the United Kingdom, and those are a lot of mouths to feed; the state has a history of rebounding - and it will - and lastly, there's a little, to quote the Beach Boys song of the same name, "California Dreamin'" in the hearts and minds of grocers, as is the case with many people from all walks of life.

Just like at its cousins' - Sprouts' and Henry's - farmers market stores, Sunflower's stores have big produce departments, where they offer hot prices on both conventional and organic fruits and vegetables. The produce department pictured above is in the Greenville, Colorado Sunflower Farmers Market store, which opened on June 23, 2010. [Click on the photo to enlarge it.]

Northern California Market Special Report

In late 2009 we sent out a tweet on our Twitter.com feed in which we reported Colorado and Arizona-based (it has headquarters functions in both states) Sunflower Farmers Market was headed to Northern California, just as its format cousins, Sprouts Farmers Market and Henry's Farmers Market were - and have done, both arriving with their forst stores this summer.

And speaking of Roseville, the now popular town for grocers with "Farmers Market" in their name, it's getting even more popular in that regard - it happens to be the city where Sunflower Farmers Market plans to open its first store in Northern California.

A 'Farmers Market' trifecta for Roseville

Sunflower plans to locate its Northern California flagship store, but far from only store in the region, in a vacant retail building in the Roseville Square shopping center near Douglas Boulevard and Interstate 80 in the city. The building's previous tenant was a Ross-Dress-for Less-store. The Sunflower Farmers Market store will be about 30,000 square-feet, with its selling space being slightly less than that after improvements and space used for a back room.

Sunflower Farmers Market, which is best described as a fresh produce and price-focused hybrid natural/organic and conventional grocery chain, has submitted renovation plans for the Roseville store to the city's planning commission. According to our sources, the grocer hopes to get quick approval and have the store ready to open by early next year, or in early spring at the latest.

As we've previously reported in the blog and on our twitter feed, Sunflower, like Sprouts and Henry's, has been looking for sites, with a focus on vacant buildings it can renovate such as those previously occupied by retailers like Circuit City, Ross and others, which there's an abundance of in Northern California.

Additionally, like its "Farmers Market" format cousins, Sunflower Farmers Market wants multiple sites in Northern California, and is searching for those sites in both the Sacramento region, the Bay Area (primarily), and elsewhere in Northern California.

As we reported in past stories, Sunflower Farmers Market, which was started in 2002 by former Wild Oats Markets founder and CEO Mike Gilliland, who is the primary owner and the CEO of Sunflower, raised $35 million for new store development and expansion in December 2009, a $30 million loan from Fifth Third Bank and a $5 million equity investment from Pacific Corporate Group (PCG). That money came on the heels of a $30 million equity investment made in 2007 by PCG.

In 2009 Gilliland told us he planned to open about 10 new stores each year for the next few years, in addition to launching into new regions. He also said plans call for Sunflower to have over 50 stores by 2013.

There are currently 30 Sunflower Farmers Market stores, located in Colorado (10), Arizona (7), Utah (2), New Mexico (6), Texas (3) and Las Vegas, Nevada (2). The Texas stores use the name Newflower due to a conflict with an existing independent natural foods store named Sunflower.

The grocer has yet to enter Southern California but it's looking for suitable locations in the region. On October 20, two new Sunflower stores are opening in Colorado, in the cities of Lafayette and Thorton. A third new store, in Longmont, Colorado, is set to open before the end of the year and a new store in Cottonwood, Utah is scheduled to open in early 2011.

Sunflower's addition to Northern California adds yet another aggressive player to what we've been saying is rapidly becoming one of the most competitive food and grocery retailing regions in the U.S.

All this activity in Northern California - which if you read the stories (linked below) we've published to date in our 'Northern California Market Special Report' series you'll be well-versed about - comes at the same time Tesco's Fresh & Easy Neighborhood Market plans to open its first batch of stores in Northern California, which is in early 2011.

Stay tuned. We'll have much more to report on Sunflower Farmers Market and Northern California soon.

About Me

Fresh & Easy Buzz is an independent Blog and is not affiliated with Tesco, Tesco's Fresh & Easy Neighborhood Market or any of its competitors.
We welcome your tips at Fresh & Easy Buzz. Your anonymity is guaranteed.
Our policy is if your tip passes our vetting and fact checking process, and we decide to use any information you provide us, we will not use your name unless you give us your express permission to do so. At no time do we ever share our sources with others.
Email any tips, inside information, comments or suggestions to us at: freshneasybuzz@yahoo.com.